Select Committee on Work and Pensions Seventh Report


7  International experience

358. We heard from a number of witnesses who highlighted international examples of systemic reform that have or aim to have a positive impact on the simplicity of social security systems. In written evidence, Professor Neville Harris explained that the UK situation is not unique; complexity is inevitable in benefit systems which allocate financial assistance based on changeable personal circumstances:

"Complexity in social security systems and legislation is not a problem that is confined to the UK. The intricacy of social security law in other states, notably the US and Australia and many European states, is also well known, while a report on social assistance in OECD countries has highlighted the complexity of such schemes. Complexity seems to be a particular problem where the system is designed to allocate resources to citizens systematically but on an individualised basis - that is, with reference to the wide range of circumstances or contingencies facing claimants - and with the need for continual updating."[379]

359. We do not suggest in this report that the measures other nations have used to address complexity can necessarily be duplicated in the UK, nor do we suggest that the UK is lagging behind international progress towards simpler benefits systems. Indeed, the Committee's trip to California demonstrated to us that our benefits system, for all its complexity, is able to provide a safety net for many people who need it when they are not working. Nonetheless, there are a number of countries that are making considerable efforts to simplify their benefits systems, which we think the Government and more specifically, the Benefit Simplification Unit should seek to examine. Professor Neville Harris provided us with a very thorough analysis of the progress that has been made towards benefits simplification internationally.

Australia

360. Examining the reforms which have been made in Australia, Professor Harris said:

"In Australia, the complexity of the system as a whole and the law of social security in particular has been widely acknowledged […] in 2004, in the Full Court, Weinberg J commented: 'Regrettably, as each year goes by, the Social Security Act becomes still more complex, and less accessible to those who most need to understand it…' Although the introduction of the Social Security (Administration) Act 1999 had aimed to make the system simpler and more coherent, complexity remained.

"Two specific initiatives concerned wholly or partly with simplification were taken in Australia between 2001-2003. First, in February 2001 the Government established a Rules Simplification Task Force comprising members of the Department of Families, Community Services and Indigenous Affairs (FaCSIA) and Centrelink, the agency which runs the benefits system on the Department's behalf. The Task Force's brief included simplification of the rules on (old) age pension and the Newstart Allowance (a benefit for persons aged between 21 years and pension age who are unemployed and who must satisfy an activity test involving seeking work or undertaking an activity to improve their employment prospects)[…] Further legislative simplification was announced in the 2003-04 budget, including measures to reduce unnecessary duplication and to alter the numbering format of the 1991 Act. However, these reforms were very modest in scale.

"The second initiative in Australia occurred in December 2002 with the publication by the government of an important policy document entitled Building a Simpler System to Help Jobless Families and Individuals […] It was proposed that design principles for a reform system of working-age benefits should include 'simplicity and fairness… People with similar capacity for work should face similar requirements. Administration is transparent, easy to navigate and cost-effective'. No conclusion was reached on whether reform should proceed incrementally, through simplification of parts of the existing system, or should involve a complete redesign to bring about 'a simpler and more responsive income support system'. However, it is clear from the report that simplification was one of a number of underlying objectives - others included incentivising working, increasing social participation and improving the benefits-tax interface - rather than the principal focus of the reform. There was a consultation period of around six months following publication of the proposals.

"A paper published by the Social Policy Research Centre paper at the University of New South Wales, Sydney, argues that, in practice, reforms to the system introduced since 2000 have tightened up on the obligations of jobseekers and improved services to some degree, but have 'failed to grapple with the problems of complexity and disincentives'. The government's failure to adopt a simpler system based on the idea of a single base rate of benefit for all, with adjustments to cover the costs of disability, job-search or children, has been criticized as an abandonment of the approach reflected in the Building a simpler system proposals. But an incremental approach was one of the options presented by the government, which has arguably been preoccupied by its policy of welfare-to-work, and it is clearly the one that it has favoured."[380]

Sweden

361. The Australian approach to reform has concentrated on incremental systemic change, which reflects the focus so far of DWP's Benefit Simplification Unit. In Europe, Professor Harris gives the example of Swedish reform which has focused on the "simplification, rationalisation or consolidation"[381] of social security schemes and legislation:

"In Sweden, the report of the 'Inquiry on Coordination of Social Insurance Legislation' (SamSol) was published in 2005. The remit of the inquiry was to undertake a technical review of social insurance statutes and to submit proposals for new legislation 'to give improved clarity and better assurance against lack of consistency as regards rules and concepts common to social insurance' and to ensure that social security legislation 'is easier to take in and apply'. The Inquiry recommended that all legislation on social insurance should be set out in a code, which would replace around 30 separate Acts. The codified legislation of France, Germany and elsewhere is cited as an influence […] It was argued that the code would improve citizen understanding and would be easier to administer."[382]

United States

362. During our visit to California, we looked at some of the efforts that the state government has made at simplifying their benefits system. At Federal level, the United States underwent major welfare reforms under President Clinton in 1996. This included the introduction of the Temporary Assistance for Needy Families (TANF) programme, which includes provisions for time-limiting welfare payments. At California State level, the time-limit is set at five years.

363. The extent to which time-limits can be defined as a simplification measure is limited, although since their introduction, States' welfare caseloads have reduced significantly, which has in turn diminished administrative burdens. Proponents of time limits argue that the real advantages of this reform lie in the clear message that "cash assistance" (as it is referred to) is transitional which, it has been argued, forced both recipients and the welfare system to focus on self-sufficiency. [383]

364. We met with a number of academics in Los Angeles to discuss the US welfare system and how it operates at federal level. Professor Joel Handler from UCLA was opposed to time-limits altogether and told us that the overall costs were very high, in terms of the break-up of families. He explained that the 10% who "time-out" of the welfare system are likely to be those who are hardest to help.

365. Zeke Hasenfeld, also from UCLA, agreed, saying that all of the research illustrates that the families who are sanctioned are the most vulnerable. Recent research has found that even those families who move into work when they reach their time limit tend to remain in poverty, as most former welfare recipient families continue to experience economic hardship and to rely on other types of public benefits, such as Food Stamps.[384] Furthermore, there is a worryingly high proportion of "poor single mothers"[385] who are neither in work or on welfare, which stood at 34% in 2004.[386]

366. We asked the Minister whether the Government had looked into the feasibility of introducing a time-limited benefits system in the UK. He informed us that the Government had rejected the idea.[387]

367. In February 2006, Berkeley Policy Associates published their first report in a longitudinal study, which aims to evaluate the implementation of welfare time limits in California and the impact of time limits on families receiving "cash assistance". The report presents data from 2003 but will report its latest findings later this year. The forthcoming report will update these administrative findings, as well as examine how families prepare for the time limit and how those subject to the time limit triggered grant reductions are faring.

368. Researchers concluded that the time limits system was operating with a number of flaws and recommended that the Californian Department for Social Services address these issues as a priority:

"The state-wide database for tracking time on aid is not yet reliable or complete[…] Tracking time on aid requires substantial staff time and resources. County staff devote substantial time to reviewing case records and to verifying exemptions and extensions […] Staff report that it can take 15 minutes to several hours to review a single case […] some counties may be providing inaccurate notices [to recipients] about the 60 month time limit.

"Despite training, few focus county caseworkers could identify all six reasons for granting extensions, five of which are also grounds for exemption […]Recipients in our focus groups understand there is a time limit, but are confused about exemption and extension policies. […]

"Our research uncovered two major issues regarding the availability of support services for time limited adults. First, recipients who participated in our focus groups were confused about their continued eligibility for support services and other benefits following their time limit triggered grant reductions. To the extent that these focus group participants represent most […] recipients, the state and counties should consider how they can better inform recipients about post time limit services and benefits. Second, recipients who reach their 60 month time limits and have their grants cut are no longer required to seek employment. As funding for optional support services dries up, counties will be less able to encourage such adults to make the transition to work and leave the Safety Net program altogether […] In the long run, such a service poor program is unlikely to benefit recipients, their children, or state taxpayers."[388]

369. The Minister advised us that the Government had considered and rejected time-limited benefits. During our visit to the USA we were told there had been very little research on the impact of time limits on claimants, including those who did not obtain employment, but that some research is due to be published later this year. We welcome the Government's rejection of time limits but consider it prudent that it reviews the forthcoming research on the US experience.

370. During our visit, we also heard about the Electronic Benefit Transfer (EBT) Card. The EBT is used in a similar way to a bank debit card and allows recipients of food stamps to purchase food through electronic transactions. By using the EBT card, cardholders can access food benefits at the point-of-sale (POS) terminals of retailers who are authorised by federal government to accept food stamp benefits. In California, each county has the option of also providing clients with the ability to access cash benefits through automated teller machines (ATMs) and cash benefits at POS terminals. The EBT Card includes a sophisticated fraud detection system. We were told by officials at the Department for Social Services that the card had also improved the benefits administration process.

371. We were impressed with the Electronic Benefit Transfer (EBT) Card that we saw in California and we would urge the Government to consider what lessons can be learned from this system for the UK.

New Zealand

372. In the previous chapter we examined the potential for fundamental reform and the introduction of a single working age benefit in the UK.

373. The idea of a single benefit has received support in New Zealand, where the Government intends to introduce a single core benefit in 2010. It aims to move away from a benefit structure that focuses on barriers to employment and replace it with a unitary ("core") benefit that streams people in terms of what is expected of them.

374. The New Zealand Government have proposed that there will be three work streams: work ready, work development (for whom a gradual transition to work or intermittent work is more appropriate) and work exempt (e.g. the terminally ill). There will therefore be work expectations on most people, to varying degrees, and benefit recipients will move between the streams depending on their work-readiness.

375. Lone parents will be in the "work development" category. They will not be expected to move immediately into work, but will be required to actively plan for their eventual entry into the workforce. The emphasis will be on engagement and support through case managers rather than on sanctions.

376. We contacted officials in New Zealand to find out how far they have progressed in terms of developing the single core benefit but the response we received gave details of piecemeal changes, as opposed to any timetable for the introduction of a new unitary benefit.[389]

377. In written evidence, Professor Harris suggested that "the key element in that simplification, the introduction of a 'single core benefit', is not in prospect at the present time and doubts have been expressed about this reform ever occurring"[390] He added:

"The New Zealand government in fact began in June 2005 to trial a model under which claimants of working age were assessed according to their work-status categorization, which is reflected in the categories now set out in the Bill and constitutes part of the first reform phase. These categories in turn broadly reflect the streams proposed for the single benefit. Consequently the need for such a benefit to be introduced is perceived to have diminished. Certainly there would appear to be no potential gains in terms of simplification, other than perhaps the somewhat cosmetic effect of an overarching name.

"There are some examples of small scale simplification contained in the Social Security Amendment Bill. For example, the definition of child dependants has been standardized as have the residence requirements in respect of a range of different benefits. A further example relates to the sanction of suspended or cancelled benefit due to failure to comply with the work test imposed (under s 117 of the Social Security Act 1964) upon a member of a couple who are in receipt of benefit … Note that the latter 'simplified' version is in fact three words longer than the former. This example also illustrates that where there is an elaborate framework governing a particular area of provision, simplification means making things simpler but not necessarily making them simple."[391]

378. We recommend that DWP and the Benefit Simplification Unit examine in detail measures which have been taken to simplify benefits in other countries. In particular, we recommend that the Government considers trends in Australia and New Zealand, particularly if and when they make any decisions on more fundamental reform of the benefits system.


379   Ev 225 Back

380   Ev 226 Back

381   Ev 226 Back

382   Ev 227 Back

383   Working Toward Independence: Maximising Self Sufficiency Through Work and Additional Constructive Activities. White House publication February 2002 Back

384   Slack et al (2007) Family Economic Well-Being Following the 1996 Welfare Reform: Trend Data from 5 Non-Experimental Panel Studies, University of Wisconsin  Back

385   Congressional Research Service, Trends in Welfare, Work, and the Economic Well-Being of Female-Headed Families with Children: 1987 - 2004 (March 9, 2006) Back

386   As above Back

387   Qq 331-332 Back

388   Berkeley Policy Associates Working Against the Clock: The Implementation of Welfare Time Limits in California [Detailed Research Findings], Feb, 2006 Back

389   Ev 239 Back

390   Ev 227 Back

391   Ev 228 Back


 
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